Revisiting Bandwidth-on-Demand Enablers and Challengers of a Bandwidth Market

This paper revisits the concept of bandwidth on demand. In the late 1990's, the promise of instant bandwidth availability led to the development of market mechanisms that companies used to trade bandwidth just as other commodities. Those trading markets all but disappeared with the bursting of the telecom bubble in March 2001. Several years after its demise, it is useful to look at the concept of bandwidth trading anew in considering the development of telecommunications in the information age. The paper offers evidence that bandwidth trading is technically feasible, improves network efficiencies and generates a good return on investment (ROI) for both carrier and operator, which translates into added service offerings for the end-customer. The paper focuses on three main issues of relevance to trading markets: network economics, regulation and technical issues. The paper conducts an introspective study of the economics of the telecommunication network and the drivers for bandwidth markets. It then discusses US regulatory issues including the proposed Telecom bill of 2005, as an amendment to the Telecom Act of 1996 and its effect on competition and the telecom environment. It goes to consider technology-related issues including new advances in control plane and data networking technology and finally combinatorial auctions and futures markets on the business side. In this paper, we take an introspective look at bandwidth trading markets. We first introduce bandwidth trading markets and their advantage versus long-term leasing contracts. The business transaction conducted between a carrier that owns the infrastructure and the service provider that builds the data network topology can be a contract negotiated over a period of time with a strict service level agreement (SLA), but also a rapid leasing transaction executed through a market the way other commodities -rice, stocks and electricity - are bought and sold. We argue for a renewed interest in bandwidth trading and consider three pillars for modern bandwidth trading that are important for the development of these markets with benefit to all pieces of the telecom ecosystem: established and competitive carriers and service providers, large and startup equipment vendors and end-users, who benefit from lower cost and new innovation